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Colonial First State Global Asset Management (including First State Investments)

PRI reporting framework 2017

Export Public Responses

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Infrastructure maintenance

INF 18. Proportion of maintenance projects where ESG issues were considered

18.1. Indicate the proportion of active infrastructure maintenance projects where ESG issues have been considered.

(in terms of number of active maintenance projects)

18.2. Describe your approach to ESG considerations for infrastructure maintenance projects. [Optional]

Major and ongoing maintenance forms a large part of the expenditure line for most infrastructure businesses. As such it is an area where there is significant scope for driving value. As highlighted in Section 16.3 we have an active approach to managing, monitoring and reporting on ESG matters across our entire infrastructure portfolio; the consideration and monitoring of ESG issues in major maintenance projects would come through these regular channels.

The drivers for ESG considerations include:

  • Proven economic benefit (makes good business sense);
  • Focus on sustainability drives operational efficiencies;
  • Mitigation to climate change effects (rising seawater levels etc.) drives investments to secure asset's sustainability;
  • Compliance with existing regulation (noting that many of our portfolio infrastructure businesses operate in the jurisdictions that have some of the highest standards with respect to environmental regulation in the world);
  • Leading the implementation of ESG considerations increases the resilience against changes in regulation; and
  • Investors looking for responsible and sustainably managed investments.

Management teams within our portfolio companies are incentivised to target ESG specific initiatives which move the company towards the top of their industry. As such the ESG targets shape every part of the business: from how the company procures its services; manages its supply chains; and down to treatment of the natural resources it exploits.

Contractors' compliance with portfolio companies ESG targets is controlled through setting up procurement processes which drive ESG outcomes and allow contractors to innovate in their contract delivery to ensure cost efficient ESG outcomes. These procurement processes generally reward contractors for better ESG outcomes via incentive payments or sharing of company financial benefits.

The long term ownership of portfolio assets allows for long term procurement strategies, which help suppliers and manufactures to optimise their processes, produce more efficiently and reduce costs. This allows for economic outperformance of capex plans which in turn will benefit customers through lower cost for the services provided.

Another focus has been on full life cycle ESG impacts and managing the individual assets over their whole life. This may or may not involve a higher upfront cost (asset replacement vs maintenance), but delivers whole of life savings on things such as resource use (energy for example) and better environmental outcomes (such as reduced carbon output or embodied carbon).

A recent example of the consideration of ESG issues in active maintenance projects is a multi-million dollar maintenance capex project at one of our airport businesses.  In this project, the existing fluorescent lighting will be replaced by energy efficient LED lighting in all car parks across the precinct.  The project will reduce CO2e emissions by nearly 3,000 Tonnes per annum and will generate demonstrable financial benefits to the business over a period of at least 10 years (supported by business case modelling in excess of 20 years).  The new technology to be employed requires lower operating and maintenance expense over time whilst maintaining the required operational output (i.e. lux levels).